Commentary: US inflation cools, sentiment improves
Global equity markets delivered strong performances last week. The major catalyst was a larger-than-anticipated decline in US June inflation, as headline CPI retreated to 3.0% y/y (from May’s 4.0%), while the core figure fell to 4.8% y/y (from May’s 5.3%). In addition, the Michigan consumer sentiment index rose significantly from 64.4 to 72.6 in July, representing the largest monthly improvement since 2006.
In US equities, the rally was quite broad-based, as S&P 500 equal and market-cap weighted indices delivered similar performances, while the small-cap benchmark, Russell 2000, outperformed S&P 500 by 1.2 percentage points. The European and emerging markets (EM) equities also responded very positively to the US inflation news, with MSCI Europe and MSCI EM advancing 5.2% and 4.1%, respectively.
As of now, S&P 500 remains only 5.4% below its all-time high reached in December 2021, while Nasdaq 100 is down 5.7% from the peak in around the same period. The situation is different for small-cap stocks, as Russell 2000 remains 20.9% below its peak form November 2021.
